coalition 2013 election policy – superannuation

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The Coalition’s Policy for Superannuation

The Coalition’s Policy

for Superannuation

September 2013

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Key Points

The Coalition is committed to Australia’s three-pillar retirement system: an aged pension

as a safety net, a compulsory system of retirement saving through superannuation, and

incentives for voluntary saving.

We encourage as many Australians as possible to actively plan and save for their

retirement, to take full advantage of the benefits the superannuation system provides and

to work toward a self-funded retirement.

Labor has increased taxation by almost $9 billion on Australians’ superannuation savings

and removed many of the Howard Government’s positive changes.

Labor’s raids on superannuation have made it difficult for Australians to plan for their

future.

Restoring stability and certainty to superannuation is a key part of the Coalition’s plan to

build a strong and prosperous economy.

To help Australians have confidence again in superannuation we pledge not to make any

unexpected detrimental changes to superannuation.

Our commitment to improving competition, corporate governance and transparency in the

superannuation industry will increase confidence in superannuation and the willingness

of Australians to make additional voluntary superannuation contributions.

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Introduction

The Coalition recognises the need to boost retirement savings as an important economic

objective.

The Rudd-Gillard Government is the biggest spending government in the nation’s history.

They have delivered the five biggest Budget deficits in our history with more deficits

forecast until after the next election.

Australians have been forced to pay the price for Labor’s waste and economic

mismanagement through higher taxes on their superannuation savings.

We recognise that superannuation is an important part of our financial system and our

national savings pool. Australians should feel confident that their retirement savings are

protected by a well regulated system. Superannuation will be included in the Coalition’s

inquiry into the financial system so that the integrity of our superannuation system will be

able to withstand future challenges.

The Coalition will restore confidence in superannuation and ensure people have the right

incentives to invest in their superannuation accounts.

The Plan

1. Certainty and Stability

The Coalition makes this pledge: we will not make any unexpected detrimental changes to

superannuation.

We will deliver greater stability and certainty on superannuation – we won’t move the

goalposts.

We will ensure that no more negative, unexpected changes occur in the superannuation

system so that Australians planning for their retirement can do so with confidence.

Under the Coalition, the superannuation guarantee will increase from nine to 12 per cent.

But the gradual increase will be delayed by two years because this money comes largely

from business and wages – not from government – and our economy needs

encouragement as mining investment starts to wane and new sources of growth are

needed. This will mean that people will have more take home pay to ease cost of living

pressure.

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2. Ensure Fairer Taxation

The Coalition will work with key stakeholders in the superannuation industry to develop an

appropriate process that addresses all inadvertent breaches of the contribution caps

where an individual can show that their mistake was genuine and the error would result in

a disproportionate penalty.

An increasing number of Australians are confronted with large tax penalties as a result of

genuinely unintentional errors resulting in their voluntary contributions exceeding their

concessional or non-concessional caps.

The penalty may be as high as an effective tax rate of 93 per cent and can be due to

actions and mistakes on the part of others, whether the employer or the superannuation

fund administrator.

Labor has provided an inadequate and partial response to the problem.

We will also revisit concessional contribution caps and incentives, such as super co-

contributions, for lower income earners once the Budget is back in a strong surplus.

3. Pay Superannuation on Paid Parental Leave

The Coalition acknowledges the disparity between the average retirement incomes of men

and women. That’s why the Coalition believes that superannuation contributions must be

paid while women are receiving paid parental leave so that women are not further

disadvantaged when it comes to their retirement savings.

The Coalition’s paid parental leave scheme will pay superannuation contributions at the

compulsory superannuation rate based on a woman’s actual wage.

Only the Coalition’s scheme includes superannuation – unlike Labor’s scheme which does

not.

As the Coalition’s scheme includes superannuation, a woman earning the average full-

time female salary of $65,000 who has a child at 26 years of age and another at 29 years of

age will be around $50,000 better off in retirement than she would have been under Labor’s

scheme, which does not include superannuation.

4. Improving Governance in Superannuation

To improve standards and better manage conflicts of interest, the Coalition will align

corporate governance in superannuation more closely with the corporate governance

principles applicable to ASX listed companies.

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The Coalition is committed to improving superannuation governance by ensuring that

there is:

appropriate provision for independent directors on superannuation fund boards;

mandatory disclosure of conflicts of interest ; and

a requirement for specific advice to APRA by those who intend to sit on multiple

superannuation fund boards that there is no potential for conflicts of interest.

The Cooper Review into the governance, efficiency, structure and operation of Australia's

superannuation system questioned the financial expertise and professionalism of union

and employer trustees who are appointed to superannuation boards through the ‘equal

representation model.’

Labor has either opposed or ignored many sensible recommendations made by the

Cooper Review to improve governance arrangements without providing an acceptable

explanation.

The Coalition will work with all relevant stakeholders to ensure Australia’s superannuation

system has appropriately high standards of corporate governance.

5. Enhancing Transparency of Information

The Coalition will improve the quality of information available to super fund members and

employers so that they can make informed decisions when comparing the relative

performance of funds.

In conjunction with the industry and APRA we will implement industry-wide definitions

and performance benchmarks that will enhance comparability and thus competition,

including:

standard reporting of fees;

standard reporting for gross and net returns on individual investment options; and

comparable definitions for asset classes and investments.

These improved reporting standards will contribute to increased transparency, a more

informed market and consequently to greater competition delivering increased value to

consumers.

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6. Cutting Red Tape

The Coalition will streamline employer superannuation reporting and cut red tape by

implementing a superannuation clearing house through the Australian Taxation Office.

Under our proposal, small business would report superannuation payments to the agency

that already collects their PAYG payments, instead of having to submit additional forms to

Medicare, which they currently must do under Labor's flawed scheme.

We will also prioritise the Cooper Review-recommended efficiency reforms ‘SuperStream’

that will allow Australians to consolidate their superannuation and help employers make

superannuation contributions by integrating superannuation with other payments (such

as for salaries and creditors).

7. Risk Management

Product innovation and increased choice in retirement products can provide significant

benefits for Australians looking for options to better manage the financial risks they face

in retirement, such as market risk, inflation risk and the risk that they may outlive their

retirement savings.

As a priority, the Coalition will review the regulatory barriers currently restricting the

availability of relevant and appropriate income stream products in the Australian market.

We will work with the financial services sector and regulators to encourage the

development of such innovative products whilst ensuring that appropriate safeguards are

in place to protect consumers.

8. Minimum Withdrawal Amounts from Account Based Pensions

The turbulence in financial markets over the past five years has placed the capital value of

account based pensions under significant pressure, which the current mandated annual

minimum withdrawals from such pensions has increased.

Labor’s response has been ad hoc and piecemeal. They have failed to develop a permanent

or appropriate solution. Instead, Labor has created fear and uncertainty amongst self-

funded retirees that their pensions may run out during their lifetimes because of the

minimum payment requirement.

The Coalition will conduct a review of the minimum payment levels to assess their

adequacy and appropriateness in light of current financial market conditions, and so

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provide self-funded retirees with confidence that their funds will not run out because of

inappropriate forced withdrawals from their pension products.

9. Fair Indexation of Military Superannuation

The Coalition will deliver fair indexation to military superannuants.

Recipients of the Defence Forces Retirement Benefits (DFRB) and the Defence Force

Retirement and Death Benefits (DFRDB) military superannuation pensions will see their

payments indexed in the same way as aged and service pensions.

All DFRB and DFRDB superannuants aged 55 and over will benefit.

Under the Coalition, 57,000 military superannuants and their families will be better off.

The Coalition is committed to ensuring fairness for our retired military personnel and to

ease their cost of living.

Not only will DFRB and DFRDB superannuants see their benefits fairly indexed – they will

also see their cost of living made easier by the repeal of the carbon tax.

The government does not increase Centrelink pensions just by the consumer price index,

so it is not fair to apply only that index to the pensions of those who have risked their lives

for our country.

Loyalty goes both ways.

The very least we can do is pay ex-servicemen and women a retirement benefit that

increases in line with the increases received by regular pensioners.

The Choice

Labor has weakened the voluntary savings pillar of superannuation by:

increasing taxes on voluntary savings by lowering concessional contribution caps

from $50,000 and $100,000 to $25,000 and freezing the indexation of that cap;

reducing the government’s superannuation co-contribution from $1,500 to $500 and

reducing the eligibility thresholds, making it harder for low and middle income

earners to qualify;

introducing a new tax on superannuation for people earning more than $300,000 a

year; and

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increasing the supervisory levy paid by self-managed superannuation funds by

36 per cent to $259.

Labor has failed to fix the problem of people being liable for disproportionate penalties

when they inadvertently breach their contributions caps.

Labor has failed to deliver on its promise to introduce genuine competition and

transparency into the default superannuation fund market.

Their anti-competitive, closed shop approach gives an unfair advantage to one segment of

the market which has close relations to Labor. Real competition would help maximise

value for all Australians whose savings are directed into a default superannuation fund.

The Coalition has pledged not to make any unexpected negative changes to

superannuation.

Choosing Labor means putting your superannuation savings at risk of increased taxes

because they do not have the discipline to wind back spending. Taxing superannuation is

Labor’s easy way out.

Australians can choose a superannuation system that provides Australians with the

capacity and incentive to save for a self-funded retirement.

The Labor alternative is a superannuation system that imposes more and more restrictive

conditions on Australians who are planning for their retirement. Labor’s approach has not

helped women properly fund their retirement at a time when they are best able to do so.

The Coalition recognises that an efficient, transparent and competitive superannuation

system requires the highest standards of corporate governance in order to deliver the best

possible value for superannuation fund members.

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coalition 2013 election policy – superannuation

Economy & Finance